BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 1649
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          Date of Hearing:   April 12, 2010

                   ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
                                   Joe Coto, Chair
                   AB 1649 (Chesbro) - As Amended:  March 15, 2010
           
          SUBJECT  :   Alcoholic beverage licensees: winegrowers.

           SUMMARY  :    Allows a winery to produce spirits of wine  
          (byproduct of wine fermentation) under specified conditions  
          without having to additionally obtain a distilled spirits  
          manufacturer's license.   This measure also clarifies current  
          statutes related to privileges of wineries and branch offices.   
          Specifically,  this bill  : 

          1)Expands the authorized activities that a licensed winegrower  
            may conduct to include the production of spirits of wine,  
            provided those spirits of wine are either blended into wine  
            produced by the winegrower, sold to an industrial alcohol  
            dealer, or destroyed by the winegrower, as specified.

          2)Makes conforming changes with regard to a licensed  
            winegrower's authorization to sell wine and brandy for  
            consumption to consumers on the licensed premises, as  
            specified. 

          3)Clarifies that current law is not intended to expand the  
            privilege for selling wine to consumers at a premises of  
            branch office to all of a licensee's branch offices but only  
            the office as approved by the Department of Alcoholic Beverage  
            Control (ABC). 

           EXISTING LAW  :
           
           1)Establishes ABC and grants it the exclusive authority to  
            administer the provisions of the Alcoholic Beverage Control  
            Act (Act) in accordance with laws enacted by the Legislature. 
           
          2)Establishes ABC and grants it exclusive authority to  
            administer the provisions of the ABC Act in accordance with  
            laws enacted by the Legislature.  This involves the licensing  
            and regulation of businesses involved in the manufacture,  
            importation, and sale of alcoholic beverages in the state.

          3)Authorizes a licensed winegrower to conduct specified  








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            activities, including authorizing a licensed winegrower to  
            sell wine and brandy for consumption to consumers for  
            on-premises consumption, as specified.

          4)Authorizes an on-sale beer and wine public premises licensee  
            and a licensed winegrower who exercises his or her license  
            privileges at specified locations to allow a person who has     
                    purchased and partially consumed a bottle of wine to  
            remove the partially consumed bottle from the premises upon  
            departure.

          5)Allows a licensed winegrower or brandy manufacturer to sell  
            wine for consumption on the premises of a branch office.  In  
            essence, extends the wine-by-the-glass privilege that a Type  
            02's master license has to its duplicate license.

          6)Defines an "on-sale" license as authorizing the sale of all  
            types of alcoholic beverages: namely, beer, wine and distilled  
            spirits, for consumption on the premises (e.g.at a restaurant  
            or bar).  An "off-sale" license authorizes the sale of all  
            types of alcoholic beverages for consumption off the premises  
            in original, sealed containers.  

           FISCAL EFFECT  :   Unknown.

           COMMENTS  :   

          According to the bill's sponsor, the Wine Institute, while  
          existing law authorizes a winery to produce the spirits of wine  
          byproduct, it is unclear whether or not the winery needs to  
          obtain a Type 04 distilled manufacturer's license to deal with  
          this byproduct.  AB 1649 states a winegrower (winery) does not  
          need to purchase a separate distilled spirits manufacturer's  
          license when producing spirits of wine (byproduct of wine  
          fermentation) provided the spirits of wine are blended into the  
          wine produced by the winegrower, are sold to an industrial  
          alcohol dealer, or are destroyed by the winegrower.  Many  
          wineries use reverse osmosis or the spinning cone technique to  
          reduce the alcohol content in their wines. 

          This bill also clarifies current statue relating to the recent  
          enactments of AB 2004 (Evans), Chapter 127, Statutes of 2008 and  
          AB 1470 (Evans) Chapter 535, Statutes of 2009.  A provision of  
          current law is amended to state that wineries are only  
          authorized to sell their own wine by the glass or bottle not  








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          wine which is produced for other businesses.  In addition, a  
          provision within AB 1470 is clarified by stating that the  
          privilege for selling wine for consumption on the premises of a  
          branch office is only for the "specific branch office" as  
          approved by ABC.  This measure does not change the customary  
          30-day public notice process that applies to the master license  
          under current law.

           Background  :  According to ABC, there are approximately 2,730  
          licenses issued to winegrowers for production facilities  
          throughout the State.  Currently, there are approximately 69  
          licenses issued to distilled manufacturers.  Approximately 50  
          winegrowers have distilled manufacturer's licenses.  Some  
          wineries use either a reverse osmosis apparatus or a spinning  
          cone system on the winery's premises for the purpose of reducing  
          the alcohol content in wine.  This procedure produces spirits of  
          wine which is a non potable distilled spirit.  
           
          Prior legislation  :  AB 1470 (Evans) Chapter 535, Statutes of  
          2009.  Removed the prohibition against licensed winegrowers or  
          brandy manufacturers from selling wine for consumption at a  
          branch office, essentially extending wine-by-the-glass  
          privileges to a duplicate license.

          AB 2004 (Evans), Chapter 127, Statutes of 2008.  Authorized a  
          licensed winegrower to sell wine to consumers for on-premises  
          consumption, as specified.

          SB 113 (Thompson), Chapter 238, Statutes of 1993.  Permits a  
          licensed winegrower (a winery) to sell wine and brandy to  
          consumers for consumption off the premises or for consumption at  
          a restaurant located at the winery or immediately contiguous to  
          it.  A winegrower must produce on the licensed premises not less  
          than 50% of the wines sold to consumers.

           


          REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          Wine Institute
          Winemakers of California









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           Opposition 
           
          California Council on Alcohol Problems
           
          Analysis Prepared by  :    Eric Johnson / G. O. / (916) 319-2531